 Thank you very much. It's quite a pleasure to share with you this afternoon about some idea about avoiding the media income trap. From the perspective of new structural economics, which I started to elabocate, and I was the chief economist of the World Bank. We are in our countries which has been growing very dynamically, like Finn and the deputy minister mentioned this morning. 20 years ago, Vietnam was one of the poorest countries in the world, majored by the pocket income at that time was only about 200 US dollars. But now the pocket income in Vietnam reached about 1,800, one of the middle-income countries. And the inspiration for the country is how to continue to grow from the middle income to high income. But we know that most middle-income countries have been trapped in middle-income status for decades. And so that's a term, middle-income trap. But I'd like to say middle-income trap is not a destiny because we observe some countries like Ireland in Europe was trapped in middle income for a century. But starting from mid-1980s, Overset then started to take off. And now pocket income in Ireland is about 90, 95 percent of the US pocket income. And similarly the East Asian economies like Singapore. Before the 1960s, the country was also trapped in the middle-income status for a century. But starting from the mid-1960s, the country growing very dynamically had become a high-income country. And some economies like Korea. In the 1960s, it was a low-income country. But the country was able to continue to grow dynamically and cry out to middle-income and not high-income. And if you look into these a few successful countries, in general, they were trapped. And all of a sudden, in certain point in time, they started to grow very dynamically. And the reason why they started to grow very dynamically in general, it's not because of those conventional wisdom, they improve their institution, their governance, or even their education. Because those kind of elements in general are not moving factors, but they started to grow dynamically over certain. And for this, I like to provide some kind of new understanding. How a country being trapped in low-income status, well, middle-income status for a long time and could have a change in their fate started to grow in dynamically. And for this, I like to say we should go back to Adam Smith. When I say we should go back to Adam Smith, I do not mean we should go back to the Welsh nation. Because Welsh nation is some kind of summary of what he formed is important to generate wealth. But I think more important is to go back to Adam Smith's approach, to understand the nature and the causes of the wealth of the nation. And for us, this topic is to understand the nature and the causes of dynamic economic growth, so a country can avoid the middle-income trap or low-income trap. We know that dynamic economic growth is a modern phenomenon. Before 18th century, all the country in the world has been stagnated for centuries, for a thousand years. And all of a sudden, in the 18th century, a group of countries in Western Europe started to grow in a jumping from stagnation to have 1% per year growth rate and then later on to have 2%, 3% growth rate. And this process was possible, everyone knows, was because of industrial revolution, which accelerate the rate of growth in technologies and also to generate series of new industries which were more, you know, far higher-value added. And by these kind of technological changes and industrial upgrading, diversification, we can continue to improve the labor productivity. But at the same time, you also need to have a continuous improvement in the infrastructure like power availability, port facilities, and the institution in legal and financial sectors to reduce transaction costs. I think that that is the nature of modern economic growth. It's a continual process of structural transformation in technology, in industries, in infrastructure and institutions. And I'd like to apply the neoclassic approach to study what are the determinants factors of economic structure and its evolution throughout the time. And according to the economics convention, I should call this type of study the structural economics. But because we know there was structuralism before and to distinguish it, I call it new structural economics. And my hypothesis is that country at different stages of development, their economic structures are different. For example, in high-income countries in general, their economic structure is in the capital intensive, the technological intensive sectors. And in low-income countries, their economic structures is in resources-intensive, whatever-intensive industries. And the difference in their economic structure for countries in different stages of development is determined by their endowment structure. That is the amount of the labor force, natural resources, capital they have. And we know that endowment structure is given at any specific time and changeable over time. And endowment structure, in effect, is the total budget of a country has at any specific time. And it also has a relative abundance in labor, capital, and natural resources. So it also determines the relative prices of the capital, of the natural resources, and also labor force. And for economists, we know two of the most important parameters in our economic analysis are total budget and the relative prices. And endowment structure determines the total budget and the relative prices are different factors at any specific time. Unfortunately, except for trade economists, we haven't paid enough attention to the implication of economic endowment and its structure. From this endowment structure we know at any specific time, those kinds of structures determine what are the competitive advantages of the economy at that time. And if all the industries are consistent with their competitive advantages, its factor cost of production will be lowest, so they will be most competitive. And in that regard, the economic structure, the industrial structure, according to our country's competitive advantages, should be considered as the optimal industrial structure at that time. Certainly, we are studying economic development. We want to increase the per capita income. If we want to increase the per capita income, certainly we need to move to the sector with higher level of productivity, and in general there are more capital intensive and technological intensive. But since that industrial structure is endogenous to the endowment structure, if you want to move up the industrial layers to higher level of productivity, so you can have higher income, you need to upgrade your endowment structure first. Certainly, if your endowment structure upgrades to more capital intensive abundance, you will have more capital intensive military, but because of the economic scale increase, market rate increase and so on, you also need to improve the high infrastructure and the institutions of infrastructure. And when we say a country is trapped in low income status or middle income status, that means the country does not have a lobby enough change in its economic structure. So its level of productivity cannot have lobby enough increase, and so they cannot handle the gap with the high income country. And then when you say this country is trapped in low income status or middle income status. And from this simple analysis we can also know, the best way for a country to avoid the income trap to have a dynamic economic growth is to follow its competitive advantages in each stage of its development. So they can be more competitive. And if they are competitive, they can generate the largest possible economic surplus. They can have the farthest accumulation of capital. And if they have the farthest accumulation of capital, they can upgrade their industries to higher capital intensive, higher level of productivity. Certainly during this period of time, they also need to improve the institution and the infrastructure. By this way, they can be competitive, and by this way, as a developing country, they can also have the advantage of back on this. In terms of technological innovation, we are going to the new industries because they can import, they can imitate the existing technology or industry from high income country to reduce the cost of innovation and the risk of innovation. But to follow the competitive advantages in the development is a jogging only understandable to economists. But how can the entrepreneurs in a country follow this principle spontaneously? I think that we need to have an institution that is competitive market. Because if you want the firm to choose their industry or technology, according to the competitive advantage of the economies, then you need to have a price signal which can reflect the relative abundance of the capital and the labor and natural resources. If you have abundant natural resources or labor force, then the prices to those factors should be relatively low. And if you have those kind of price signals, then firm for the profitability, they might use more capital, more labor force or more natural resources and enter into those kind of sectors. Then those kind of activities will be consistent with the country's competitive advantages. So market institution will be an essential institution of precondition for the country to follow competitive advantages. But we also need to have an enabling state there because economic development is a process of continuous structural transformation, technological innovation, industrial operating improvement of institution and infrastructure. And in this process, we need to have the first mover to enter into the industries. First mover, we know we need to have incentive to the first mover in order to compensate for the externality that the first mover produce. And also the success of the first mover very much depends on whether you have those kind of desirable changes in infrastructure institutions. But individual firms will not be able to internalize all those kind of changes. So that's the reason why we need to have a state to provide the coordination of different investors in the improvement of infrastructure institution where the state need to provide those kind of changes by the state itself in order to facilitate the structural transformation. And if the state need to play a full situation role, industrial policy should be a very helpful tool because the content of coordination will be different. Very much depends on what kind of new industry you want to develop. For example, if you want to go to, let's say, agro-processing, then some kind of core chain might be very important. But if you want to go to labor-intensive garment or footwear, then electricity supply or port facility will be desirable. If the state has unlimited resources can provide all the necessary improvement in the infrastructure for every possible industry, that will be fine. However, the government resources is limited. So the government need to strategize the use of its limited resources and to make the necessary improvement to facilitate the growth of new industries. So I think that industrial policy should have a very essential role. Certainly we know that industrial policy is taboo for a long time. The reason is because most of industrial policy failed. And the reason why most industrial policy failed is because in the past the government in general was too ambitious. They tried to develop industries which go against their comparative advantages. For example, in the import substitution strategy period the advice to most developing countries was to develop larger scale modern industries which are so capital intensive on the basis of a poor agrarian economy they did not have so ever comparative advantages in those kind of sectors. And as a result, that kind of industrial policy creates a lot of sectors which look sexy but firms in those kind of sectors in an open competitive market. And as a result, the government need to give them all kind of subsidies and protections. And a subsidy of protection in general is in the form of all kind of distortion and a repression in the market activities. And that kind of distortion create rent and risk and also cause misallocation of resources. That was the reason why the industrial policy in the past did not work well. However, so from our analysis for an industrial policy to be successful let me repeat for an industrial policy to be successful the industrial policy should target sectors which the countries has latent competitive advantages. What do I mean by latent competitive advantages? The latent competitive advantages is that according to the factor cost of production the country lowers the level in the world. That means these sectors is consistent with their competitive advantages determined by their factor environments. But they are not competitive yet. Why come they are not competitive? Because to compete in the world domestic market or international market it's a competition based on the total cost. But the total cost is also related to the transaction cost. And the transaction cost is determined by hard infrastructure like power facilities or port facilities or available skill workers or the access to finance or financial changes. And if those kind of infrastructure or institution were not there then the transaction cost will be too high. So even a country should have competitive advantages in those sectors like Africa today their level cost is so low only about one tenth of China's level cost they should have competitive advantages in their very intensive industries but they were not competitive not because of factor cost of production it is because of transaction cost is too high. Then the industrial policy to try to help the firm in those kind of sectors to reduce the transaction cost and if the government can do that this kind of industrial policy should be very effective should be able to produce a lot of quick wins. But let them compare advantages means that it's not there yet and how can you identify the sectors which you have let them compare advantages. And I like to say historically all the successful countries in the catching up stages they all have very proactive government industrial policy intervention starting from 16th, 17th century that when Britain wanted to catch up Netherlands up to recently like in the 1960s and the four small dragons Korea, Taiwan, Hong Kong, Singapore wanted to catch up Japan or in the 1980s China wanted to catch up four small dragons and so on. That's one thing in common. The government industrial policy in general target industries currently their pocket income is not too far away from them it's about 100% higher than their pocket income in the 1920s century in general you target country which their pocket income is about one-third or one-half higher than yours but because technology will change very fast now you may be able to target country which their pocket income is about 200% higher than yours that is something in common I find all the successful industrial policy they are motorists they try to catch up the industry in dynamic growing country which their pocket income is not too far away and if you look into the reason why most of the industrial policies in the past fail because they are type ambitious they wanted to target industries in country their pocket income five times, even 10 times or 20 times higher than yours for example in the 1950s China, India all have automobile industries at that time automobile industry was the comparative advantage of US and China and India their pocket income is only less than 5% of US pocket income so that means 20 times higher and that was the reason why the automobile industry in China in many other countries failed and why the industrial policy should target industries in dynamic growing country with a similar endowment structure here let me explain what do I mean by similar endowment structure if you try to foresee the growth of industries which are resources intensive like agricultural product or marrow certainly you need to have those kind of natural resources whether or so year you are trying to foresee the growth of manufacturing sectors then you only need to look into the capital labor ratio and the capital labor ratio is a very good proxy for that is pocket income so when I say similar endowment structure we are talking about the manufacturing sectors then we only need to look into capital labor ratio and that pocket income will be a very good proxy for that and the reason why we need to target countries which are growing dynamically and their pocket income is not too far away from yours I think the reason is that the industrial upgrading is based on the upgrading in your endowment structure and a country with similar endowment structure there should be similar right and we know if a country growing dynamically for several decades that means what? almost all the industry in the country should be consistent with their competitive advantages otherwise they cannot grow in dynamically for several decades you know if you through the government intervention to develop certain industries go against your competitive advantages you may be able to have an investment that grows for a few years but other than that you are stagnant just like what we observed in the 1950s and 1960s so if a country can grow in dynamically for several decades then almost all the industry in the country should be consistent with the country's competitive advantage otherwise they cannot be so competitive but if they are growing dynamically for several decades their capital accumulation should be very fast so many of the industry used to be their competitive advantages not they are going to be their sensitive industry but if your stage of development is not so their sensitive industry will be your sunrise industries so in this regard the fast growing countries and their income level is not too far away their tradeable industry is the blueprint of your late comparative advantages and we have a lot of existing tools to do the industrial policy and I don't have time to explain them so I'll jump skip that and based on this understanding the growth the new structure economics try to promote a framework for the country to do the industrial policy and to generate dynamic economic growth the first step is that the country should identify fast growing country with similar endowment structure and currently their pocket income is about 100% higher than yours or 20, 30 years ago their income level was similar to yours 20 or 30 years ago their income level was similar to yours and they are growing dynamically and their industry are consistent with their competitive advantages and those kind of industries should also be consistent with your competitive advantages the third step from countries their pocket income is similar to yours and those kind of products should also be consistent with your late comparative advantages because if other country with similar income is yours they can produce and compete international learning from them your endowment structure is similar to theirs so then you should also have late comparative advantages in those kind of sectors so I have three criteria one is that fastest growing country their income level is about 100% higher than yours or 20 or 30 years ago you are in the same income level or you import a lot of goods from other countries which are on your same income level then those kind of industry should be your late comparative advantages and this is very important to understand a list of late comparative advantages and avoid the government to be too ambitious to make mistakes or to avoid being captured by the private sectors because for the private sectors they have two ways to make profit one is to increase their competitiveness or ransacking sometimes the private sector will come to the government and say well this sector is so important so you should protect us but in fact it's not a 4G modernization it's for ransacking so the government need to have an understanding of a list of the products or sectors which are likely to be your late comparative advantages and based on those three principles I just mentioned with this kind of understanding the government come back domestic to see whether you already have some private sectors in those kind of sectors even some private sector in those kind of sectors your factor of cost of protection should be lower than your competitors but how come you cannot be competitive and what are the reason why you are not competitive you can do some kind of gross diagnostics or value chain analysis to see those kind of mining constraints then the government should help to remove those kind of mining constraints to facilitate the new entry with a scale of the existing firm and this can have the advantage of incorporate the past knowledge which is emphasized by Ricardo Hortzman and also apply the dynamic logic approach to see the mining constraint of the existing firm but for a low income country it's not necessary that you need to have a toxic knowledge in fact if a sector is totally new to you and as I argue those kind of sectors should be the sunset industry in the reference country so those firms should have the incentive to relocate their production to other country with low wage rate and so in a state your department are not too far away they should have the incentive to relocate to your country how come they have not and what are the reason it may be because they don't know your country so you need to do investment promotion it may be because infrastructure is not good enough what institution is not good enough then you try to identify the mining constraint and help them to remove that and to persuade the foreign direct investor to come so that's the third state and this means that you don't have to confine yourself to jump into the trees which only nearby as you know argue by the Ricardo Hortzman the first step is that technology changing so fast technology changing so fast so there are some sectors which denied this 20 years ago where every country has some unique endowments and in this regard if you have some private sectors identify those kind of new opportunity and start to show the profitability the government should also help them to remove the mining constraint and to scale up them or to encourage new entry and one example was information processing business in India in 1980s it was a new firm of business before 1980s but some India firm identified the opportunity at the beginning they used satellite for they used satellite for telecommunication it was very expensive so they changed it to the then based telecommunication dramatically reduced the information cost and now it became the leading sectors in India so that's the first step here that when I talk about the gross identification and the facilitation most people immediately jump say you know you argue the government picking the sectors but here you can see in effect the gross identification of facilitation is a process that the government working with the private sectors the government need to avoid two mistakes one is that the government might be two ambitious or the government being captured by the private sectors and the gross identification the first step help the government to avoid those kind of two mistakes but in effect eventually the sector will be developed in the country depends on the private sectors because step two, step three step four are all determined by the private sectors the government also the only though the government there is to help the private sectors in those areas to remove the transaction cost but as I said developing country in general by definition they must have poor infrastructure they must have poor business environment certainly if the government has unlimited resources then you will be desirable to improve everything for every sectors but unfortunately the resources is limited so one pragmatic way is to develop industrial parks with spatial economic zone within the park and spatial economic zone make infrastructure good enough make business environment good enough and this you can create a partial localized good environment to facilitate the growth of sectors which you have so this is a pragmatic way of coordination and this also the reason why we see many dynamic growing income countries like Vietnam like China like Indonesia if you look into their general business environment by the World Bank indicators they were very poor but they were able to grow very dynamically it was because they were able to create this kind of localized good environment and to facilitate the growth of sectors which they had little advantage and turn that into the competitive sectors and finally you need to provide some incentive for the first mover and the first mover the purpose is to compensate for the externality and so the incentive does not have to be large some kind of tax holidays or preferential access to capital if you have in a capital control financial replacement or preferential access to foreign exchange if you have capital control to allow them to import the necessary equipment and so on that should be enough and so that is the framework I try to advocate for a low income country to jumpstart the very dynamic growth path and to overcome the middle income trap or low income trap and so let me conclude the middle income trap is not a destiny if a middle income country or low income country can follow its competitive advantages to develop its economy and you can enjoy the laycomer advantages then it can grow dynamically and close the gap with the high income country and in this process an effective market in order to provide signal to know what kind of sectors are likely to be your competitive advantage or letting competitive advantages is crucial but the government also need to play an enabling role to facilitate the overcoming of high transaction costs due to the poor infrastructure or business environment or institution or governance by this the middle income country should have the hope to overcome the middle income trap and to grow dynamically and even become a high income country and I have two books on that one is new structural economics the other one is the quest for prosperity thank you